In an effort to save money and rein in expenses, Spotify, the Swedish music streaming behemoth, has announced that it will lay off 1,500 employees, which accounts for about 17% of its staff. The decision was not an easy one, but it was deemed necessary due to the dramatic slowdown in economic growth. Daniel Ek, the CEO of Spotify, stated that taking substantial action to rightsize their costs was crucial for the company to achieve its goals.
Mr. Ek acknowledged that these layoffs would be incredibly painful for the team, as many talented and hard-working individuals would be departing from the company. He recognized the valuable contributions that these employees had made. While Spotify had announced some layoffs earlier in the year, this current round of layoffs far outweighs them. Despite the difficult decision to let go of employees, Spotify has experienced positive financial outcomes lately. Thanks to price increases and an increase in member numbers, the company recorded a profit of €65 million for the three months ending in September, marking its first quarterly profit in almost a year.
With an ambitious target of reaching one billion users by 2030, Spotify has been actively expanding its global presence. At the end of 2020, the company had 345 million users, and that number has since grown to 601 million. These job layoffs may come as a surprise to many individuals, considering the recent positive growth that Spotify has experienced. In fact, Spotify had initially contemplated implementing modest cuts in 2024 and 2025, but eventually realized that more extreme measures were required to align with the company’s economics.
Since its inception, Spotify has invested heavily in expanding its company and acquiring unique content. In addition to a vast music library, the service now offers podcasts featuring prominent figures such as Barack and Michelle Obama, the Duke and Duchess of Sussex, and more. Notably, the partnership with Harry and Meghan reportedly cost $25 million and lasted for 2.5 years before termination in June. During that period, 12 episodes were released. Mr. Ek commented on the podcast content, stating that while some of it has worked, some of it hasn’t.
The impacted workers will receive notifications from Spotify on Monday. As part of the severance package, employees will receive around five months of compensation, along with holiday pay and health insurance. Additionally, Spotify will provide assistance to workers whose immigration status is linked to their job.
Unfortunately, the tech industry has faced significant challenges with numerous layoffs following the boom during the COVID-19 pandemic. British telecommunications company BT announced in May that it would be cutting up to 55,000 jobs by the end of the decade. Meta and Microsoft, two of the largest names in technology, have also announced their intentions to lay off up to 10,000 workers this year. Similarly, Amazon, the world’s largest online retailer, and Alphabet, the parent company of Google, have both announced layoffs of approximately 12,000 employees. Yahoo and LinkedIn have also added to the pain by announcing layoffs within their organizations.
However, amidst the wave of layoffs, Apple has taken a different approach by declaring its intentions to add AI experts to its workforce. While the current tech industry landscape may be challenging, it is important to note that various companies are finding unique ways to adapt and grow. As Spotify undergoes these difficult layoffs, it remains to be seen how the company will navigate the evolving market and continue its pursuit of global expansion and user growth.
